Consistent with other similar credit rating services, Moody’s Creditors Service has dropped Oman’s sovereign rating for the second time this year as a lower commodity price outlook is expected to affect the nation’s oil revenues.
Earlier S&P Global Ratings had made a similar assessment while Fitch Ratings had ranked Oman one level higher.
Moody’s made it clear in its statement on yesterday that Oman has been downgraded a notch below Ba3-three levels to its non-investment grade scale. Its outlook was changed to negative too. Moody’s also revised its Brent crude price assumption for 2020 to $35 per barrel and that of 2021 to $45 per barrel.
“The downgrade reflects the conclusion that in a lower oil price environment, which Moody’s now assumes will persist into the medium term, the government will unlikely be able to significantly offset the oil revenue loss and avoid a large and durable deterioration in its debt and debt affordability metrics or erosion of its fiscal and foreign currency buffers,” the statement said.
Oman is the biggest Arab oil exporter outside OPEC. It had cut its capital spending and declared liquidity assistance in an attempt to provide some relief from the economic shock caused by COVID-19. It is also, allegedly addressing the prospect of financial support from wealthier neighbors.
“But Oman still has a strong liquid fiscal and foreign currency stock reserves, and they can slow their financial deterioration with the support from neighboring countries along with spending and revenue measures”, said Moody’s.